Loan Denial-Bankruptcy

Posted By: Anonymous

Loan Denial-Bankruptcy - 08/20/13 07:22 PM

My supervisor is just want to check if "bankruptcy" alone is a good enough reason to deny a loan. She says in the past an examiner told her this was not good practice.

Thank you.
Posted By: James M. Moore

Re: Loan Denial-Bankruptcy - 08/20/13 07:37 PM

I've heard many theories on the amount of reasons to provide for denials. The commentary says no more than four unless one is for excessive inquiries.

I look at it this way...You have made loans to persons with bankruptcies in the past. Why not this one? (The answer to the question is your second denial reason) You are required to provide the principle reasons for denial and I'm assuming there is more than just the one you stated.

It is also a good idea to provide the maximum four as it makes it harder for an examiner to include denials for comparisons to marginally approved credit during fair lending reviews. They need apples to apples for comparison.
Posted By: Dan Persfull

Re: Loan Denial-Bankruptcy - 08/20/13 08:27 PM

When The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was signed into law bankruptcy was brought under the umbrella of the Consumer Portection Act.

From Reg. B 1002.1:

(b) Purpose. The purpose of this part is to promote the availability of credit to all creditworthy applicants without regard . . . . . or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.